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The Candy Crush: King milking out Candy

I do not know how people can be so insane about Candy crush that Candy Crush Saga, made its pitch to potential investors for its initial public offering couple of days back, revealing in a U.S. Securities and Exchange Commission filing just how good its business has been. By the way I don’t like the Candy crush invite on Facebook.

Every month, millions of people download King’s free apps, only to pay up for little digital trinkets that help them make progress in its games. People managing huge investment funds are probably just as hooked as the rest of us on those blinking jelly beans.

The way people changing taste social network and IT gaming companies en-cashing the opportunities, Facebook and Whats-app is a different story in line would put up with details soon.

Back to Candy Crush :

1) The number of users is bonkers. (More even than one might expect.) King games have been downloaded on 500 million mobile devices, almost one game for every person in Brazil and the U.S. What’s more, about 408 million of those consumers play at least one game a month; some 124 million play every day.

2) The candy is cheap. Making a mobile phone puzzle of blinking suckers, as one might suspect, is not expensive. King has only has 665 employees and parcels development out to small, autonomous teams of designers working with a “startup” mentality. Last year, the company spent $110.5 million on research and development, roughly 6 percent of sales. Facebook (FB), in comparison, spent 18 percent of last year’s sales on research.

This suggests that King is no one-hit wonder. It has already made dozens of games and distributes widely only those few that show great potential. Here’s how the company described it in its SEC filing: “We believe we have a repeatable and scalable game development process that is unparalleled in our industry.”

3) King buys business. The company says many of its gamers find its offerings “organically”—through friends, word-of-mouth, or glancing at the screens of strangers in airports. King also pays to target potential users on social networks. Every day, it operates thousands of such marketing campaigns. King has been in business since 2003, but its games took off when platforms such as Facebook refined small-scale marketing strategies.

4) Candy Crush is basically like paying your taxes. How has such a seemingly mindless puzzle of blinking and beeping so thoroughly captivated so many? That’s the obvious question for any non-Candy Crusher who has peeked at a King game in progress. And that will be the question confronting hedge-fund honchos thinking about buying the stock.

The answer is simple. King’s games attempt to provide “a sense of achievement.” The puzzles are just challenging enough—and short enough—to provide a little dose of progress. Basically, the company has replicated the fulfilling feeling of loading the dishwasher or flossing your teeth. Exhibit A: King’s No. 2 game is called Pet Rescue.

5) More Crushers prefer “free.” King says it’s committed to providing free games and being transparent about its pricing for digital add-ons—possibly a little too transparent. Most people clicking and swiping away on its platforms never turn over a dime. For each monthly user in the past quarter, King Digital collected just $1.48 in revenue and 39¢ in profit. That’s not necessarily shabby, given how little it costs to serve that customer, but there’s evidence that Candy Crushers are growing even more tight-fisted.

The problem is, people like what they already know. King’s most recent title, Farm Heroes Saga, is basically the same game as Candy Crush Saga with different art, and Papa Pear Saga is pretty close to EA subsidiary PopCap’s seven-year-old puzzle game Peggle.

That’s not to say innovation is the answer. Candy Crush was pretty similar to another PopCap hit, Bejeweled, but went farther on the back of its addictively calculated level design, social networking savvy gameplay and aggressive marketing strategy. To keep growth up and investors happy, King will need to either innovate on new titles more aggressively — increasing the chances of lightning striking twice — or continue to tweak its big games to further extend their staying power.

Given how much King has milked out of Candy Crush already, the second scenario is especially interesting. More hardcore free-to-play games on other platforms can last a very long time if game companies continue to support their online communities and supply new content.